What are Income Tax rates under new & old tax regime as govt made no changes this year?
The Union Budget 2026, presented by Finance Minister Nirmala Sitharaman, has brought a sense of relief to individual taxpayers as it has kept the personal income tax rates unchanged. This decision is expected to provide stability and predictability to taxpayers, allowing them to plan their finances better. In this blog post, we will delve into the details of the income tax rates under the new and old tax regimes, highlighting the tax slabs, rates, and the implications of choosing one regime over the other.
New Tax Regime
The new tax regime, introduced in 2020, offers a simplified tax structure with reduced tax rates. Under this regime, the tax rates are as follows:
- Income up to ₹12 lakh is tax-free, providing a significant exemption to low- and middle-income earners.
- Income between ₹12 lakh and ₹16 lakh is taxed at 15%, which is a relatively moderate rate.
- Income between ₹16 lakh and ₹20 lakh is taxed at 20%, which is still lower than the tax rates under the old regime.
- Income between ₹20 lakh and ₹24 lakh is taxed at 25%, which is a slightly higher rate.
- Income above ₹24 lakh is taxed at 30%, which is the highest tax rate under the new regime.
The new tax regime is designed to be more taxpayer-friendly, with reduced tax rates and a simplified tax structure. However, it also comes with certain conditions, such as the inability to claim certain deductions and exemptions, like the standard deduction, interest on housing loan, and deductions under Section 80C.
Old Tax Regime
The old tax regime, which has been in place for several decades, offers a more complex tax structure with multiple deductions and exemptions. Under this regime, the tax rates are as follows:
- Income up to ₹2.5 lakh is tax-free, which is a relatively low exemption limit.
- Income between ₹2.5 lakh and ₹5 lakh is taxed at 5%, which is a low tax rate.
- Income between ₹5 lakh and ₹10 lakh is taxed at 20%, which is a moderate tax rate.
- Income above ₹10 lakh is taxed at 30%, which is the highest tax rate under the old regime.
The old tax regime allows taxpayers to claim various deductions and exemptions, such as the standard deduction, interest on housing loan, and deductions under Section 80C. However, it also involves more complex tax calculations and requires taxpayers to maintain detailed records of their expenses and investments.
Comparison of New and Old Tax Regimes
The choice between the new and old tax regimes depends on individual circumstances and tax planning strategies. The new tax regime is more suitable for taxpayers who have simple tax affairs, with minimal deductions and exemptions. On the other hand, the old tax regime is more beneficial for taxpayers who have significant deductions and exemptions, such as home loan interest, investments in tax-saving instruments, and charitable donations.
It is essential to note that the new tax regime is optional, and taxpayers can choose to opt for it or continue with the old regime. The choice of tax regime can have significant implications on tax liability, and taxpayers should carefully evaluate their options before making a decision.
Implications of No Changes in Tax Rates
The decision to keep tax rates unchanged in the Budget 2026 is expected to have several implications for taxpayers and the economy as a whole. The stability in tax rates will provide predictability and certainty to taxpayers, allowing them to plan their finances better. It will also encourage investment and consumption, as taxpayers will have more disposable income at their disposal.
However, the decision not to reduce tax rates or increase the exemption limit may disappoint some taxpayers, particularly those in the lower and middle-income brackets. The lack of changes in tax rates may also limit the government’s ability to provide relief to taxpayers and stimulate economic growth.
Conclusion
In conclusion, the income tax rates under the new and old tax regimes remain unchanged in the Budget 2026. The new tax regime offers a simplified tax structure with reduced tax rates, while the old tax regime provides more deductions and exemptions. Taxpayers should carefully evaluate their options and choose the regime that best suits their individual circumstances and tax planning strategies. The stability in tax rates is expected to provide predictability and certainty to taxpayers, encouraging investment and consumption, and supporting economic growth.
For more information on the Budget 2026 and the income tax rates, please visit: https://indianexpress.com/article/india/budget-live-2026-new-vs-old-income-tax-rate-cut-slab-change-fm-nirmala-sitharaman-speech-announcements-10504348/lite/
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